Analyzing differences between scenarios
Comparisons between alternative scenarios are used in many disciplines from macroeconomics, through epidemiology to climate science to help with planning future responses. Differences between scenario paths are often interpreted as signifying likely differences between outcomes that would materialis...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
| Published: |
Elsevier
2022
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| _version_ | 1797109275986755584 |
|---|---|
| author | Hendry, DF Pretis, F |
| author_facet | Hendry, DF Pretis, F |
| author_sort | Hendry, DF |
| collection | OXFORD |
| description | Comparisons between alternative scenarios are used in many disciplines from macroeconomics, through
epidemiology to climate science to help with planning future responses. Differences between scenario
paths are often interpreted as signifying likely differences between outcomes that would materialise in
reality. However, even when using correctly specified statistical models of the in-sample data generation
process, additional conditions are needed to sustain inferences about differences between scenario paths.
We consider two questions in scenario analyses: First, does testing the difference between scenarios yield
additional insight beyond simple tests conducted on the model estimated in-sample? Second, when does the
estimated scenario difference yield unbiased estimates of the true difference in outcomes? Answering the
first question, we show that the calculation of uncertainties around scenario differences raises difficult issues
since the underlying in-sample distributions are identical for both ‘potential’ outcomes when the reported
paths are deterministic functions. Under these circumstances, a scenario comparison adds little beyond
testing for the significance of the perturbed variable in the estimated model. Resolving the second question,
when models include multiple covariates, inferences about scenario differences depend on the relationships
between the conditioning variables, especially their invariance to the interventions being implemented. Tests
for invariance based on automatic detection of structural breaks can help identify in-sample invariance of
models to evaluate likely constancy in projected scenarios. Applications of scenario analyses to impacts
on the UK’s wage share from unemployment and agricultural growth from climate change illustrate the
concepts. |
| first_indexed | 2024-03-07T07:39:31Z |
| format | Journal article |
| id | oxford-uuid:8b4319a3-b92f-4889-b026-00023cb1c32f |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T07:39:31Z |
| publishDate | 2022 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:8b4319a3-b92f-4889-b026-00023cb1c32f2023-04-05T08:53:49ZAnalyzing differences between scenariosJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:8b4319a3-b92f-4889-b026-00023cb1c32fEnglishSymplectic ElementsElsevier2022Hendry, DFPretis, FComparisons between alternative scenarios are used in many disciplines from macroeconomics, through epidemiology to climate science to help with planning future responses. Differences between scenario paths are often interpreted as signifying likely differences between outcomes that would materialise in reality. However, even when using correctly specified statistical models of the in-sample data generation process, additional conditions are needed to sustain inferences about differences between scenario paths. We consider two questions in scenario analyses: First, does testing the difference between scenarios yield additional insight beyond simple tests conducted on the model estimated in-sample? Second, when does the estimated scenario difference yield unbiased estimates of the true difference in outcomes? Answering the first question, we show that the calculation of uncertainties around scenario differences raises difficult issues since the underlying in-sample distributions are identical for both ‘potential’ outcomes when the reported paths are deterministic functions. Under these circumstances, a scenario comparison adds little beyond testing for the significance of the perturbed variable in the estimated model. Resolving the second question, when models include multiple covariates, inferences about scenario differences depend on the relationships between the conditioning variables, especially their invariance to the interventions being implemented. Tests for invariance based on automatic detection of structural breaks can help identify in-sample invariance of models to evaluate likely constancy in projected scenarios. Applications of scenario analyses to impacts on the UK’s wage share from unemployment and agricultural growth from climate change illustrate the concepts. |
| spellingShingle | Hendry, DF Pretis, F Analyzing differences between scenarios |
| title | Analyzing differences between scenarios |
| title_full | Analyzing differences between scenarios |
| title_fullStr | Analyzing differences between scenarios |
| title_full_unstemmed | Analyzing differences between scenarios |
| title_short | Analyzing differences between scenarios |
| title_sort | analyzing differences between scenarios |
| work_keys_str_mv | AT hendrydf analyzingdifferencesbetweenscenarios AT pretisf analyzingdifferencesbetweenscenarios |